What defines a bearish market?

A bearish market is characterized by a decline in stock prices, generally defined as a drop of 20% or more from recent highs. This decline is often accompanied by negative sentiment among investors, leading to a lack of confidence in the market's future prospects. Additionally, bearish markets can reflect broader economic challenges, such as high unemployment, reduced corporate profits, or other indicators of an economic slowdown.

In this context, the correct answer captures the essence of a bearish market perfectly, as it highlights the dual aspects of falling stock prices and a struggling economy. These factors tend to feed into one another; for example, when stock prices fall, investor confidence typically decreases, leading to reduced spending and investment in the economy, which can further exacerbate economic difficulties.

Other choices do not align with the concept of a bearish market. The first option refers instead to a bullish market, where rising stock prices generally reflect economic growth. The second option suggests stability, which does not connect with the negativity inherent in a bearish outlook. The fourth option describes high investor confidence and growth, which is contrary to the very nature of a bear market, where investors are typically pessimistic about future performance.